TradingIntermediate#Market Microstructure#Liquidity
Order Book Depth
O
Definition
The displayed quantity of resting bids and offers at selected price levels on one venue or data feed. It is a time-specific view of stated trading interest, not a guarantee of executable liquidity, future price, or participant intent.
Source reviewed
- CFTC: Liquidity in Select Futures Markets opens in a new tab
Supports: Distinguishes public-feed order-book depth, bid-ask spread, order size, and the possibility that larger trades consume several price levels; the study's measures are venue and product specific.
- SEC Investor Bulletin: Trading Basics opens in a new tab
Supports: Explains that market-order execution price is not guaranteed in a fast-moving market and that a limit order can constrain price without guaranteeing execution.
Concept Diagram
Key Takeaways
1
Depth is a venue- and time-specific display of resting orders, not the whole market or a promise of liquidity
2
An execution can differ from a depth snapshot because orders, routing, fees, latency, priority, and available levels can change
3
Order walls do not prove support, resistance, participant identity, manipulation, or a future price move
4
Volume records completed activity while depth records displayed unfilled interest under feed-specific rules
Practical Example
A venue shows far more displayed bids than offers within one percent of the last trade. A reviewer records the exact feed and timestamp but does not call this support or predict a rise. Before trading, they check the order type, total size, fees, and actual fills; some displayed orders may be cancelled or inaccessible by the time the order arrives.
Finished learning?
Related Terms
Blockchain
Liquidity PoolAssets supplied to a smart-contract market-making system so swaps can execute against its rules instead of a traditional order book. The assets, fees, price curve, liquidity shares, withdrawal conditions, and risks depend on the specific pool and protocol.
Trading
SlippageThe difference between a quoted or expected trade result and the result that can execute under the protocol's state and limits.
Trading
Bid-Ask SpreadThe difference between the best displayed bid and best displayed ask on a specified venue and moment. It is one execution-quality measure, not a complete trading cost, universal liquidity rating, or guaranteed fill price.
Related Deep Dives
Master the hub of Trading
Explore all our strategic guides about Trading to take your operations to the next level.
View all articles